Carroll DMACC economist: Sequester imperfect, but does cut

Des Moines Area Community College Carroll Campus economics professor Mark Maggio says federal sequestration is not the best way to streamline federal spending. But cutting the debt is vital for the nation, and much of the predicted fallout from the sequester amounts to exaggeration and political gamesmanship. Daily Times Herald photo by Douglas Burns

March 1, 2013

About $85 billion in across-the-board federal spending cuts this year are being unleashed today through a sequestration resulting from the inability of Congress and President Barack Obama to compromise on spending and revenue.

"The impacts of sequester are real," Jay Carney, the White House press secretary, told reporters on Thursday. "These are about real issues. These are about the concrete effects of policies on people's lives."

That may be true, but sequestration, for all its imperfections, does take square aim at the $16.6 trillion federal debt, says Mark Maggio, Des Moines Area Community College Carroll campus economics professor.

Earlier this week, Maggio, who does not hide his fiscal conservatism from students, spent much of an economics class talking about the sequester, what he thinks it really means.

Maggio's takeaway on the issue: "Not a smart way to cut, but it does cut."

With a meat-cleaver approach, some of the worst programs in government, ones that perhaps should be killed altogether, will see just 2 percent cuts, and the best programs, deserving of full funding, get hit at the same time, Maggio said.

But those who believe the debt and deficit are major problems have some reason to cheer as spending is being cut, Maggio told his class.

He noted that Social Security, Medicaid, child-health programs and military pay and benefits are exempt from the cuts.

"I'm willing to endure the sequester," Maggio said. "It's not as big as people are saying."

New York City Mayor Michael Bloomberg has offered a similar assessment.

Under the sequester, federal spending will be cut by 2.3 percent, Maggio said. The sequester will cut $85 billion from this year's $3.6 trillion federal budget.

"The federal government will have to get by on 97.7 percent of its funding," Maggio said.

But there will be pain in Iowa, the Obama administration says.

According to the White House some of the effects this year through sequestration are:

- Iowa will lose $6.4 million in funding for primary and secondary education, putting the jobs of about 90 teachers at risk.

- More than 1,000 Iowa college students will not be able to have work-study jobs to help pay for school.

- Head Start and Early Head Start will be eliminated for about 900 children in Iowa.

- About 2,000 civilian Department of Defense employees in Iowa will be furloughed, reducing gross pay by around $7.4 million.

Nationally, the Federal Aviation Administration, for example, will be forced to absorb a funding cut of more than $600 million, which will mean a majority of its 47,000 employees will be furloughed for one day per pay period. The result, says the Obama administration, will be streamlined air travel and slower service for passengers.

Cuts to food inspections could put consumers at risk and cost billions for producers, the White House says.

Senior meals, child-care services, mental health and a host of other federal programs are expected to take hits.

Obama and his congressional allies have proposed a mix of spending cuts in tax increases on the wealthy instead if the across-the-board cuts, which the president has called a "series of dumb, arbitrary cuts to things that workers depend on, like education, research, infrastructure and defense."